CIGNA disability-claims dispute leads to $77 million settlement

The CIGNA Group has agreed to set aside $77 million and pay the state significant fines to settle claims that it improperly denied long-term disability claims or terminated payments.

Insurance Commissioner Thomas B. Leonardi announced today that a regulatory settlement had been reached with CIGNA that calls for the company to set aside $48 million as it continues to re-evaluate claims. Another $29 million fund is intended to settle currently open claims, he added.

CIGNA also will be required to pay the state nearly $1.7 million in fines and administrative fees, plus another $150,000 to ensure that regulatory compliance over the next two years is monitored.

“This regulatory action is intended to provide long-awaited relief for consumers who have a right to expect that their carrier will make good on contractual promises,” Leonardi said in a statement. “This settlement resulted from market conduct exams and encompassed issues of serious concern.”

Leonardi said an investigation of the company’s practices was conducted by the state in cooperation with regulators in California, Maine, Massachusetts and Pennsylvania. The probe examined claims procedures of CIGNA’s Pennsylvania-based subsidiary Life Insurance Company of North America, along with Connecticut General Life Insurance Company and CIGNA Health and Life Insurance Company (formerly Alta Health and Life).

“It is a solid example of regulatory cooperation in protecting the policyholders of Connecticut and other jurisdictions,” Leonardi said.

In addition to monetary considerations, the Connecticut settlement requires CIGNA and its susidiaries to improve their claims-handling processes, establish a remediation program to look back at previously denied or terminated claims and participate in ongoing claims sampling as well as a re-examination after the monitoring period.